What Amazon’s New Frustration-free Packaging Requirements Mean for CPG Brands

Share

Have you ever bought something relatively large from Amazon and wondered why the manufacturer’s retail box was stuffed inside an additional shipping box? For consumers, the extra packaging may seem wasteful and can be cumbersome to dispose of, creating an unpleasant customer experience.

This “double box” effect on larger items (all items larger than 18″ x 14″ x 8″ and/or 20 pounds), which includes essentially all products that ship through non-sortable Amazon facilities, has created enough negative buzz that the online retailer has recently instituted new mandatory requirements for its Frustration-free Packaging Program that go into effect during late Q3 of 2019.

Amazon Created Frustration-free Packaging

Amazon has been a longtime proponent of eliminating packaging waste. They also believe that packaging is a critical part of providing a great customer experience. In 2008, Amazon invented the idea of Frustration-free Packaging to “reduce waste, lower cost, and delight customers with easy-to-open, 100% recyclable packaging.” This program focused on incentivizing suppliers to rethink packaging for the digital shelf.

In the beginning, Amazon focused on 19 of the worst offenders that used hard plastic “clamshells” and plastic zip ties. Since then, the Frustration-free Packaging Program has grown to include 750,000 products, eliminating more than 244,000 tons of packaging materials and saving the equivalent of 360 million shipping boxes. Additionally, the recent announcement to institute mandatory measures shows they are doubling down on their efforts.

What Is Frustration-Free Packaging?

The mission at Amazon is to be the world’s most customer-centric company, and that means, in part, providing those customers with minimal, protective and functional packaging. Those packaging goals help to lower costs, reduce waste and optimize the customer experience. The Frustration-free Packaging Program at Amazon has three general tiers, which are listed in reverse order:

Tier 3 – Prep-free Packaging: In this tier, packaging would still require an additional box for shipment to the customer but reduces the prep required by Amazon.

Tier 2 – “Ships in Own Container” Packaging: In this tier, packaging is designed to ship to the customer in the same container in which it arrives to Amazon.

Tier 1 – Frustration-free Packaging: In this tier, packaging would meet Tier 2 requirements but is also easy to open with minimal packaging materials.

Who Is Affected by the New Requirements?

Firstly, the scope of this program is limited to products that are “Sold and Fulfilled by Amazon.” That means if you are not selling through Vendor Central, you are not included in the program for now.

Secondly, Amazon is only tackling items with package dimensions of 18” x 14” x 8” and/or greater than 20 pounds. They are focusing on these larger items first because they have the biggest impact on Amazon’s goal of continuously improving the customer experience. Amazon has also excluded items that are sold on Prime Pantry or Amazon Fresh.

When and How Are They Affected?

Amazon will require the products noted above to arrive in its distribution centers in certified packaging that meets Tier 2 – “Ships in Own Container” Packaging requirements. This means that the packaging must not require any shipping preparation or an additional box. To be certified for Tier 2, packages must also pass Amazon’s various tests that involve free-fall drops and vibration levels and are intended to simulate the conditions an item is likely to be subjected to during normal distribution and carrier supply chain processes.

Currently, Amazon is offering an early adopter credit to assist in the transition costs for suppliers. This will be available until the deadline to comply passes on Aug. 1, 2019. After that, suppliers will be assessed an additional chargeback fee until the new packaging requirements are met.

CPG Brands Should Embrace E-commerce Packaging Changes

The CPG industry is currently dealing with a significant transition away from a world in which packages primarily sit on physical store shelves waiting to entice potential buyers to one in which packages sit on warehouse shelves waiting to be picked, packed and shipped to customers. Though this new reality provides inherent challenges, overcoming those challenges can unlock an immense amount of diverse benefits.

Sustainability

This equation has proven to be effective for CPG brands, as it can improve a brand’s reputation by connecting it with something larger than the product itself. One of the biggest causes supported by Millennials is sustainability. In fact, almost 85% of Millennials have said that it is “extremely” or “very” important that companies implement programs to improve the environment. Sustainability is more than just reducing packaging, however. If a CPG brand is facing a packaging update, it would be wise to also consider using recyclable or compostable materials. Brands can also design packaging that is reusable. This concept has gained attention outside of Amazon, but it could provide a future pilot opportunity to implement on the marketplace.

Margin Expansion

Though there would be some obvious upfront costs associated with redesigning a package to meet Amazon’s requirements, these costs could be amortized over a responsible period of time by its associated increased gross profit margins. In most cases, if the package is optimized for Amazon’s new requirements, it should lessen the total packing materials, which should decrease the overall packaging cost.

Margin expansion actually helps both parties. Depending on the size and weight reductions from the redesigned packaging, it could help Amazon’s shipping costs from the supplier and to the customer. This increased item profitability could provide more buffer for not landing on the Amazon CRaP list.

Customer Experience

Getting a customer to purchase a CPG product online and having it arrive undamaged at their home is only part of the battle. Once it arrives, shoppers need a pleasant unboxing experience. In addition to repeat purchases, this experience could also lead to organic social media impressions, as many Generation Z and Millennial buyers naturally share their unboxing experiences online. To improve the experience, focus on eliminating difficult, cumbersome or messy packaging. Though these variables help the bottom line (as stated above), they also help the consumer experience by leaving a strong lasting impression.

Procter & Gamble Is Leaning In

One of the most lauded recent examples of a CPG brand working with Amazon to improve its packaging is P&G and the new Tide Eco-Box. Not only does the Tide Eco-Box serve as its own shipping container, but it also uses 60 percent less plastic than the comparable bottle version and 30 percent less water. Additionally, the new box is four pounds lighter due to a volume decrease that makes the product more concentrated so there is the same number of total available uses in each container.

Joshua Schall, MBA has an 11-year background in the emerging and intersecting CPG/FMCG categories of functional food and beverage and nutritional products.

He currently is the owner of J. Schall Consulting, an Austin, TX-based boutique management consulting company that focuses on digital growth strategies for CPG/FMCG brands that range from pre-launch to portfolio companies with $500M in yearly revenue.

Joshua enjoys an active healthy lifestyle but still finds himself spending way too much time scanning social media and digital grocery aisles for new consumable brands.

The top 3 search results on retailer websites receive 70% of clicks and 30% of conversions.